Wednesday, September 22, 2004

OutFoxed: Rupert Murdochs War on Journalism

He's my SBS Dateline report on OutFoxed: Rupert Murdoch's War on Journalism. Watch it here.

And gee it was fun to see the US during the Republican National Convention, and witness a protest march and chanting against a news organisation!

Here's George Negus's introduction:

In the US, the presidential election campaign is now entering the home straight. And there is one man who may well determine the result - Rupert Murdoch, who owns what has become one of the most influential news outlets in the country.

Fox News is now the highest rating cable news network in the States.

But it is winning enemies as well, with critics claiming it is taking journalism to new lows with its outrageous bias in favour of the Republican Party.

Peter Martin has more.


Wednesday, September 15, 2004

At any rate, we're on borrowed time

There's a real economic debate taking place in Australia, and there's a fake one, concocted for the sake of the election.

The fake debate concerns interest rates. You can sample it on the National Party website. There you are asked to key in the size of your home loan and are rewarded with a box outlining your likely repayments under three scenarios.

They were: "Coalition 7 per cent", "Labor 10 per cent" and "Labor 12 per cent".

The Nationals are honest enough to admit that these scenarios "should not be used as a substitute for professional financial advice". Too right. But why have they been used at all? In part because, like all good fables, the myth that the Labor Party inevitably brings with it higher interest rates contains within it an element of historical truth.

In November 1989, in a last, desperate bid to rein in what he felt was runaway spending, the then treasurer, Labor's Paul Keating, personally oversaw a hike in the cash rate to 18 per cent. His principal adviser said later he could hear the economy snap. Australia slid into recession. Banks and financial institutions collapsed.

In making that sort of decision Keating wasn't alone. In 1960 the Liberal prime minister, Robert Menzies, and his treasurer, Harold Holt, imposed a disastrous credit squeeze; in 1973 Labor's Gough Whitlam and his treasurer, Frank Crean, did the same; and in 1982 Liberal Malcolm Fraser and his then treasurer, John Howard, pushed up money market rates to a peak of more than 20 per cent ahead of the recession of that year.

But Keating was the last political leader able to do so. In January 1990 the Reserve Bank grabbed control of the process and never handed it back. It took a decision to cut interest rates and issued a press release in its own name saying so. It has decided on and announced every adjustment since. The Treasurer, Peter Costello, granted it formal independence with an exchange of letters in 1996.

As it happens, the Reserve Bank's decisions have been kind to the Coalition... In the final years of the Keating government the Reserve's then governor, Bernie Fraser, increased interest rates and kept them high to squeeze out inflation. He began cutting rates within months of Howard taking office. As the Macquarie Bank's Rory Robertson puts it, Howard had low inflation and low interest rates handed to him on a platter. Robertson asks: "Wasn't it Woody Allen who said 80 per cent of success in life is just showing up?"

Put five economists together and the odds are that none of them will be able to think of a likely scenario under which the Reserve would be forced to push rates higher under a Labor government than under the Coalition. Labor's $3.5 billion family and tax centrepiece is hardly inflationary. It is funded by 18 separate savings measures. And while Labor's industrial relations policy will increase the bargaining power of some workers, wage explosions are a thing of the past in the Western world. There is too much competition from China and India.

In any event, mortgage rates in the teens are unlikely in the years ahead precisely because we have got used to single-digit rates. They have helped double the price we are prepared to pay for houses. Reserve Bank figures show the typical mortgagee now devotes more of his or her income to mortgage payments than was the case when rates were at their highest at the end of the 1980s. (Memo to John Howard: remember that the next time you are about to claim, as you did on Sunday night, that paying off a home is easier now than it would have been had the old rates remained.)

The increased difficulty of meeting mortgage payments means that Australians are now very sensitive to even a small lift in interest rates. If the Reserve Bank wanted to cause us real pain, it wouldn't need to push rates much higher to achieve it.

Which brings us to the real economic debate, unmentioned in the campaign. The big shift in house prices has been devastating for Australians not yet in their own homes. It has slashed the value of their lifetime earnings.

But it's made the larger number of us who own or who are buying our homes feel suddenly wealthy - consumer confidence is near an all-time high - and act wealthy - 60 per cent of us now say it's a good time to buy a household appliance.

And we don't need to wait until we have earned the money. Refinancing allows us to dig into the equity in our homes and spend more than we earn.

Australian households have been spending more than they have earned for the past two years. The household saving rate is minus 3.2 per cent. Compare that with the crazy days of the late 1980s when the Coalition was driving "debt trucks" and issuing dire warnings about us living beyond our means. Then the household savings rate was positive - 8 to 10 per cent. We can't and won't go on forever spending money we are not earning. When we fall to earth we are likely to get hurt.

The Treasury warned in its pre-election statement on Friday that our rising household debt made us more vulnerable to shocks.

It's the real economic debate that we're unlikely to hear much more of until the election is out of the way.


Wednesday, September 01, 2004

Money can buy happiness. Here's how.

Driving to work this past week, I've had an insight into the key to happiness. We have moved house, and it now takes twice as long as it did to get to work each morning. No big deal, do I hear you cry?

Well, it seems like a big deal to me, and the more I ask, the more I discover that to researchers in the field of happiness, it is one of the very few things that is.

Their problem is that happiness is slippery. Money or changed circumstances can buy more of it, but the effect usually doesn't last long.

It needs to be said first that happiness itself is easy to measure. The researchers ask people whether they are (a) very happy; (b) fairly happy; or (c) not happy.

The results line up with other measures of happiness.

The people who say they are happy are those more likely to call up friends, less likely to commit suicide. And their brains light up in the same sort of pattern when they are put under a scanner...

The researchers find that people who win the lottery do indeed feel happier to start with, but after a while they feel a little better than they did before. Conversely, people mutilated in accidents feel devastated at first, but after a year or so often feel as happy as always.

As Ethan Hawke puts it in the new movie Before Sunset: "If they were basically optimistic and jovial, now they're optimistic and jovial in a wheelchair. If they were petty and miserable, now they're petty and miserable with a new Cadillac, a house and a boat."

Each of us seems to have our own built-in happiness equilibrium, resistant to attempts to upset it. The Holy Grail in economic research (as with much pharmacological research) is to work out how to use money to break free of it.

Robert Frank, a Cornell University economist, believes that as a matter of logic it must be possible. He says money can buy many truly useful things. Surely, some of them must be able to make a permanent impression on the way we feel.

In the journal of the American Academy of Arts and Science, D├Ždalus, he asks: "Would we really not be any happier if, say, the environment were a little cleaner, or if we could take a little more time off, or even just eliminate a few of the hassles of everyday life?"

He says the problem is that we choose to spend money on things that don't help. In the US house sizes are getting bigger and bigger. In Australia the typical new house has doubled in size over the past 50 years. It's now more than 250 square metres; about 100 square metres of indoor space per person. And many of the new houses being built in Sydney's south-west are bigger still.

Is all of the extra space making us happier? The evidence suggests that more space doesn't make us happier for long, in the same way as better views from our office windows don't work their magic for long. We get used to them.

But there are things that we could spend money on instead that might make a good deal of difference to the way we feel about life.

Robert Frank asks us to perform this thought experiment. Imagine, he says, two societies, equally wealthy, but with different patterns of spending. In society A the houses take up 4000 square feet and the journey to work takes one hour each day in heavy traffic. In society B the houses are 3000 square feet, and the journey to work takes only 15 minutes. He asks in which society we would prefer to live.

If we were choosing on the basis of likely happiness, the answer would have to be society B. All of the evidence suggests that the stress of driving through traffic is something we never completely adapt to. It wears us down day after day, and it shortens our lives. Escaping it stands a very good chance of making us happier.

Frank performs other thought experiments. Which society would you rather live in? One in which everyone lived in a house of 4000 square feet and had one week's holiday a year, or one in which the houses were 3000 square feet and people got four weeks off each year?

In each case he is offering a choice between "conspicuous consumption" and what he calls "inconspicuous consumption". Frank's notion of inconspicuous consumption usually involves time: arranging things so that you have more time to do the things you like, by spending less time doing the things that you don't.

It's a lesson that would come as no surprise to my teenage daughter. She's grown up playing The Sims, an incredibly complex computer game in which you manipulate the decisions of artificially intelligent beings in simulated societies. It's a sort of electronic economic laboratory.

One of the unexpected discoveries made by fans of The Sims is that the best way to make the characters happy is to have them free up their time, rather than buy them luxuries. In the words of the game's creator Will Wright, time is the resource, happiness is the score.

Perhaps that's just a result of the way that game is set up. The characters in the computer game don't seem particularly susceptible to envy. But if we were less susceptible to envy as well, we probably would not be as keen as we are on large houses. We would look for smaller houses closer in; saving ourselves stress, giving ourselves the gift of time, and quite possibly genuinely buying happiness.

The boom in inner-city living over the past few years suggests it's a realisation that more and more are waking up to. The next time our family moves, perhaps we should, too.